Richard Wilson is founder of Wilson Holding Company and the CEO of The Miami Family Office, a single family office with $500M in assets, he runs the largest family office association globally, and is a bestselling author of The Single Family Office Book.

Wikinvest Wire

Hedge Fund Redemptions

After investing in hedge funds some accredited investors have a much harder time getting their money out of a hedge fund then into them. While this is often preventable it is usually the result of:

Preset lockup periods where investors must keep their money in the fund for a minimum of 6 months to 3 years depending on the fund mandate but negotiable

The liquidity of the asset classes the hedge fund deals with. Some hedge funds work in such illiquid markets that they will have redemption clauses in their contracts that allow them to wait 3-12 months for more liquid markets before being forced to sell a position.

Arbitration. The process of going through arbitration and looking at which funds have been through it before can vary widely and be difficult. While a definate exception to the rule if you get invested with a rogue hedge fund manager you might have to chase them through arbitration or other legal means to redeem your initial investment.

All of this lends to making sure you have your investment goals and expectations clearly defined so they can included in research a hedge fund consultant does for you and so you can just keep these extra thing in mind while doing research yourself. Many hedge funds do not have lockup periods of more than 3-6 months and the majority work in relatively liquid markets. As the Financial Times put it, "The salutary lesson for those wanting to invest directly in hedge funds is that, under the commonly used limited partnership framework, they are, in effect, going into business with a managing partner, not just investing."

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